The Bank for International Settlements (BIS) published a study that called into question the true decentralization of liquidity in DeFi - the analysis showed that liquidity is mainly concentrated in institutional investors, and decentralization manifests itself only at the technical level.

Experts note that such a structure is more reminiscent of traditional finance and does not contribute to complete democratization of the market.

DeFi Liquidity Decentralization

Decentralized finance (DeFi) aim to revolutionize the financial sector by providing access to financial services without intermediaries. One of the key features of DeFi is the decentralization of liquidity.

What is liquidity decentralization?

Decentralization of liquidity means that financial assets and funds are distributed across a blockchain network rather than concentrated in one place. This allows users to access liquidity directly, without having to go through centralized financial institutions.

Advantages of liquidity decentralization:

1. Availability: Liquidity is available to all users with internet access and a compatible wallet.
2. Cost reduction: Eliminating intermediaries reduces transaction costs and financial services costs.
3. Transparency: All transactions are made available to the public, increasing transparency and accountability.
4. Safety: Using smart contracts and other security features of the underlying blockchain network reduces the risk of fraud and hacking.
5. Programmability: Ability to develop complex financial products and software.

Examples of using decentralized liquidity:

1. Lending and Borrowing: Users can borrow digital assets directly from each other without intermediaries.
2. Trade: Decentralized exchanges (DEX) allow you to trade cryptocurrencies and other digital assets without the participation of intermediaries.
3. Insurance: Smart contracts provide insurance services, protecting assets from threats.
4. payments: Peer-to-peer payments and money transfers across borders without intermediaries.

The decentralization of liquidity in DeFi gives users more power, transparency, and accessibility over their finances. This has the potential to completely transform the financial sector by eliminating intermediaries and increasing the security and transparency of financial transactions.